A Simple Trading Strategy: Triple RSI

Introduction

Step 1: Set Up Your Charts

An Oscillator (a type of indicator that measures overbought and oversold conditions)

Two or three favorite financial instruments

Step 2: Find a Trend

Open up a chart. Let’s start with the EUR/GBP currency pair on a 15 minute chart. Now, place the oscillator on your chart. I’m going to use the Relative Strength Index (RSI), set to 21.

Do you see that the RSI is overbought (circled in red)? That means that price has moved in one direction (up) for longer than it usually does. It doesn’t guarantee that it will fall. But it suggests a fall might be coming.

Now, let’s see if we can stack the odds (of a drop) in our favor.

Let’s see if the EUR/GBP is overbought on the next time frame higher – the 60 minute chart.

Yes, it is! This is good. It means that we’ve gone up “too far” on two time frames.

Let’s move up another time frame – to the 4 hour chart:

Ok! Now we’re overbought on 3 time frames!

This means that the trend may be getting exhausted. We want to set up a sell trade.

What We’ve Done So Far

We cycled through our charts until we found a financial instrument that is overbought or oversold on at least 3 consecutive time frame charts. This is not normal; it happens rarely. We want to set up a sell trade.

(Of course we could do this in reverse for buy trades. Check out this course to get more videos and the full set of rules).

How to Set Up the Sell Trade

Let’s drop back down to the 15 minute chart. And now, we’ll draw at least 2 trendlines underneath the rising candles. And we’ll draw a trendline underneath the rising RSI.

We can sell the EUR/GBP when any of these three things occurs:

Price breaks below trendline #1.

Price breaks below trendline #2.

Price breaks below trendline #3 – the trendline we drew on the RSI. This means: If you see the RSI line break below the trendline – sell the currency pair.

Stop-Losses and Profit Targets

The first thing we do is define our maximum risk. I would recommend placing a stop-loss above the highs of the candles above those 15-minute trendlines.

And a profit target – I would recommend moving out to the 60 minute or 4 hour chart, and drawing another trendline – and target that level. Remember, the closer your profit target, the more likely it will get hit (and that you will make money).

Increase Your Knowledge

To watch more videos of this method, see live trading examples, and more, get yourself into the “Triple RSI” course. Access it here: